Interim earnings decline by 16% at Kumba

Operators repair a broken limiter on a stacker belt at Kumba's Kolomela mine in the Northern Cape. Kumba Iron Ore's results for the first half of the year showed a 16 percent decline in headline earnings, but it said the labour environment was stable. Photo: Supplied

Operators repair a broken limiter on a stacker belt at Kumba's Kolomela mine in the Northern Cape. Kumba Iron Ore's results for the first half of the year showed a 16 percent decline in headline earnings, but it said the labour environment was stable. Photo: Supplied

Published Jul 23, 2014

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Dineo Faku

EARNINGS at Kumba Iron Ore were hard hit by a decline in export prices, coupled with input cost pressures during the six months to June, the company said yesterday.

The local producer reported a 16 percent decline in headline earnings to R6.5 billion in the six months to June compared with a year earlier.

Attributable earnings a share for the period were R20.30 and headline earnings a share came in at R20.28.

Average prices for iron ore – the main ingredient in the production of steel – dropped 19 percent to $111 (R1 180) a ton in the first half compared with $137 a ton a year earlier.

Steel production and the outlook for the price has been dominated by low-cost production in Brazil and Australia.

The 16 percent decline in the rand/dollar exchange rate during the period helped to boost revenue marginally to R26.4bn for the period compared with R26.3bn in the same period last year.

Despite the lacklustre financial performance, the Kumba share price rose 0.95 percent to close at R343.34 on the JSE yesterday, after the company promised it would continue paying dividends.

The Anglo American subsidiary declared a R5bn interim cash dividend, or R15.61 a share, at 1.3 times cover during the period under review.

“It remains the group’s intent to continue to pay excess cash to its shareholders, after considering growth and investment opportunities, while remaining within its committed debt facilities,” chief executive Norman Mbazima said.

Production recovery plans are under way at Kumba’s Sishen mine in the Northern Cape, where the pit is being redesigned and the mining plan improved. This will result in output rising to 37 million tons a year by 2016. The mining plan includes increased productivity through better use of the fleet, the construction of two new waste dumps and the Dingleton town relocation project.

Tons mined at Sishen rose by 5 percent to 107.2 million tons from 102.5 million tons, while waste produced rose by 6 percent to 86.9 million tons.

Kumba began construction of houses, businesses and churches as part of its Dingleton relocation that will make way for the expansion of Sishen.

“We are confident: we did a lot of work planning; we did a lot to deliver on the plan in 2016 for Sishen,” Mbazima said.

Kumba is planning a major reconfiguration at its Thabazimbi mine in Limpopo that will increase production to 2 million tons a year.

The company said the first half of the year saw a stable labour environment. “Wage negotiations, which commenced in June, are progressing and are expected to be concluded,” Mbazima said.

The group expects total capital expenditure for the year of up to R8.2bn.

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